tv Squawk Box CNBC August 12, 2013 6:00am-9:01am EDT
good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with andrew ross sorkin. scott, thanks for being here this morning. >> thank you, becky. >> we're ready to go on a monday morning. >> are you ready to go? >> i am. >> did anybody stay up to watch "breaking bad" last night? >> no. i had to prep for the show. did you? you've seen it. >> we had actually seen it. >> i should have because i couldn't sleep anyway. you know. might as well have taken a show in. >> tick, tick, tick. how many hours till i have to wake up? it's a hard transition when you don't do this every week. anyway, we do have a busy week on the economic front. it's a slow start today with only an update on the federal budget this afternoon. but today we have the nfib survey of small business sentiment. we also get retail sales, import prices and business inventories. on wednesday, we have the july producer price index. on thursday, of course, we have the weekly jobless claims. plus we have july cpi. the empire state survey, tick data, industrial production, the
philly fed survey and the national association of home builders. friday, housing starts, productivity and cost and consumer sentiment. the equity picture this morning at least ahead of all that not looking too great. dow futures 77 points below fair value. the s&p is off 10. and this is coming after the dow last week was down for the first time in seven weeks, when you look at the major average for what was happening. a little bit of rockiness out there after a long, steady climb higher. in global economic news, japan's economy grew at a slower than expected rate in the second quarter. gdp coming in at 0.6%. also, capital expenditures unexpectedly fell for the sixth straight quarter. economists say that this is a sign that companies are still not boosting spending despite prime minister shinzo abe's policies. been working on consumers at least for the very first quarter that they were looking at some of those things hasn't translated through to business. in corporate news, u.s. authorities are reportedly considering arresting two former jpmorgan employees for their alleged role in masking the
so-called london whale losses. the main target of the investigation is said to be javier martin artejo who worked as a direct supervisor. authorities are also reportedly looking at julian grout who was his junior trader. no word on the timing of the possible arrests which could take place in london. u.s. authorities plan to extradite the former employees to the united states. >> did you see also there's a separate story that says that prosecutors and the fbi plan to maybe bring a case against jpmorgan. so there was the civil case against the firm, but then this was a criminal case against the company. and what i found odd and awkward about that -- and tell me if i'm wrong -- is if you believe that these two employees were acting in some kind of rogue capacity as criminals, it's then hard to -- because they would argue they were being then lied to and everything else. >> right. and being misled. >> and being misled, then how can you claim that the company is running as a criminal thing? >> right. >> it's either the company is directing -- >> it's being directed by rogues
or from the top. that was my take on the whole thing, too. i don't understand how you have it both ways. >> sorry to interrupt. pardon the interruption. that's another network. sac capital preparing for the exit of outside investors. "the journal" reports the firm's executives are looking at means to streamline the company as it shrinks. on friday federal prosecutors reached a deal to keep the firm operating during the legal case, assuring that the firm can continue. and the cftc has subpoenaed a metals warehousing firm. reuters reporting the commodities regulator wants all of the documents related to the london metal exchange since january 2010. this is the latest on that inquiry into complaints about inflated metal prices and lots of questions about whether people are moving metal back and forth inside warehouses. separately, and this is big news for those of us who have an apple iphone.
ms. quick. she's still on the blackberry. apple expected to launch its newest iphone september 10th at a special event. this coming courtesy of all things "d" which is reporting the company will also launch a new version of the mac osx operating system in the coming weeks. one quick note for those of you planning to run out on september 10th, there was some question mark as to whether they would just announce the product on that date or make it available. oftentimes they announce it and then within a week it's available. and sometimes within 30 days or 60 days, it's available. so big question. but ahead of the christmas season, nonetheless. in other tech news, a u.s. trade panel ruled in apple's favor. that happened late friday. some older samsung models are facing sales -- a sales import ban in the u.s. as a result of all this. the trade commission ruled samsung infringes on portions of two apple patents on digital mobile devices. the patents cover the detection of headphone jacks and the operation of touch screens. now, president obama has 60 days
to review this decision. if he doesn't veto the order, it will go into effect. and if you remember, he vetoed the order when it came to apple. we will see what happens when it comes to samsung. becky? we do have more boardroom drama at jc penney today. "the wall street journal" reports the board met late yesterday afternoon to talk about their next move. the directors are looking at ways to remove bill ackman from the board. the article also notes that it's questionable whether ackman has violated his duties as a board member. there may be a de facto board that excludes ackman. scott, i'm glad you're here for this discussion because this has gotten weirder and weirder. >> it has indeed. >> i thought it was bizarre when we first heard about what was happening. because as a board member, you wonder if he'll be operating from the inside or outside. this is more typical of an outside activist shareholder thing. charles nelson in this "journal" article raises questions whether
he did anything wrong at all. he says it would be really difficult to remove him. >> it's funny, the board, i guess, they're upset at bill ackman for putting out confidential deliberations within the board. >> i think most of the board learned about it by watching cnbc. that was what i think they were upset about. >> they probably were. but if they were upset about that, then how are we learning about this most recent thing that happened over the weekend with the board call? that was leaked. >> to "the wall street journal." >> to the media, right. so the very thing the board was complaining about -- >> so now -- >> no, i'm just saying. i'm just saying. right. >> i disagree. i think when you start putting out press releases under your own name that are pages long, i mean, and these are letters supposedly internal letters that are supposed to be sent around and then describing what's actually happening, you can't do it. now, i don't think you can kick him out of the board, but i think you can de facto, exclude him. >> so a targeted leak with no press release is okay?
i think either one. you're talking about a board now in disarray. >> look, it would be better if nobody was leaking, but i think that he started the fight. i'm sorry. you can't -- you can't run a company with a guy on the board -- you can't plan to have meetings knowing that the meetings are going to be to the public every day. it's just impossible. you can't do it. >> i agree but i think that they are doing the same thing that they are criticizing with this article in "the wall street journal." look, ity -- i don't know that ackman helped himself or the jc penney board by anything out there. >> here's the distinction. and i don't mean to -- >> i think the problem is this is now not only a board that's in chaos but a company that's in chaos. and what this article also points out that that you have suppliers who are looking and need to know 18 months in advance whether this is a viable company. >> the problem here in this particular instance is ackman. it's not the rest of the board. the reason that they're in chaos now is because ackman decided to release the letter. and as good reporters as everybody is here, i don't
believe that ackman released the letter because we were calling him and trying to get the news. to the extent there was an article in "the wall street journal" this morning is because there were reporters who called multiple board members. >> i think you're slicing it a bit too thin. i think you're looking at it from very inside baseball journalism. >> there was a board member putting out press releases, and there's another or maybe several who accepted phone calls who maybe gave little morsels. >> i think you are splitting hairs. i think it's bad in both situations, for the best good of the company. >> you know, we're storytellers, so we actually like the leaks. but i'm not suggesting that the leaks are a great situation for anybody. but i think if you look at sort of how this works, it's impossible for him to actually operate on the board. >> can they do a de facto board where they just exclude him? >> yes. >> this is a guy who was made in. you can't start creating boards that function within themselves. that's not really listening to the shareholders' vote anyway.
>> do you want to get into a situation where let's just say you're jc penney. if you're the board, if you're the company, would it be -- would you rather have ackman just out? would you rather have him sell all of his stock? is that going to be good? i don't think so. there is a view. >> look, i look at ackman and i think he's been very successful in many instances, in many instances i look at ackman and think he's done a great job at figuring out where there's value. in jc penney, i think he is responsible -- responsible -- and i think there's a rewrite of history going on here for why the company is in the problem it's in. not because of the phone call or the e-mails last week. >> but who would have known that ron johnson was going to be a dud? >> oh, hold on. there's one thing that know that ron johnson is a dud. maybe you wouldn't have known he was going to be a dud, but he let it go for a remarkable period of time. the board let it go. they gave him so much rope to
hang himself with that he ultimately hung all the shareholders. there is no way to rewrite this any other way. and what i find despicable about what's happening here -- despicable, i'm sorry to say that -- >> now what are you, howard schultz? >> put me in the category. i do find it despicable where there's a rewrite of history where you have ackman trying to say that the board is responsible for the company's problem where he personally -- he has more -- i don't want to say -- he has more job losses and trouble on his hands than anybody on that board. and so it's very tough to sit here and say that this company is somehow, you know, that this board member has somehow been an improvement to the company. very difficult. >> maybe so, but to lay the whole -- i mean, the board -- the whole board is culpable for even -- even though he was bill ackman's guy, the board's still culpable for ron johnson and ultimately ron johnson's responsible for the mistakes that have led to the company where they are now. he did not live up to the
expectations of anybody. >> no question. >> of anybody. >> no question. >> and that's his own doing at the end of the day. >> he did not. >> he commuted -- he commuted -- he was a commuter ceo in a situation where they needed boots on the ground. and his boots were in the air. >> i do think that mike altman is being blamed. i think he's helped try to right the ship. i think painting him in any of this is ridiculous. >> what was he going to do in such a short period of time? >> i feel like he's bearing -- i think ackman has made him look like a bad guy, and that's not the case. >> that's what's wrong with this whole situation. so there's a point at which if you're a board and you see all this going on and you see this one guy who's created a lot of trouble, you say how can i work with this guy? you say do you exclude him? how do you deal with him? you can't continue on this way. whatever's going on, it cannot be the continued path. >> now it's come to a head,
right? they're going to figure out what to do. they're going to have to try and remove him from the board which is incredibly difficult and wouldn't even come up for a potential vote until spring of next year, or they're going to have to work together. >> or operate around him. sounds like a de facto board. >> it's awfully hard to work around a guy who's got 18% -- >> that's what i would guess. >> -- of the company, don't you think? not to mention if you put -- we'll have someone on later who can talk about this specific issue. i think there's the legal issue. he's a minority shareholder, so it's not clear that you have -- you have to listen to all your shareholders, but it's not clear -- i mean, he's on the board so he should have a role on the board. >> from a governance perspective. >> you do have 25% of the stock that is on bill ackman's side, and that's between ackman and perry capital, right? so that's a sizeable stake. >> it becomes a huge issue, probably can't be ignored, but
it does look like this board is at complete odds, and obviously it's not the last word we'll hear on this. there's going to be more on this. we'll discuss it a little later with our guest host coming on in just a little bit. also, another corporate fight, oh, boy, here we go again, dell. this is the struggle between ceo michael dell and activist investor carl icahn. it's reportedly starting to spook some customer. dell's pc shipments slid 4.2% in the second quarter compared to a year earlier. this raises the question of activist investor good or evil? there are a lot of time where's they can really come in and force a company to focus and then sometimes you wonder if it gets too drawn out and gets to the point where it becomes a problem. and these numbers would seem to point that maybe this has dragged on a little too long at dell. >> it's not over. >> it's not over either. in market news, the pimco total return fund increased its exposure in july to 39% from
38%. bill gross's fund also decreased its mortgage holdings to 35% from 36% in june. the fund's performance turned positive in july. financials are close to regaining the s&p's top spot. at their 2007 peak, financial stocks in the s&p had a collective net worth of more than $2.9 trillion, and that was roughly 30% greater than that of technology stocks, but then came the housing bust and the financial crisis. now the financial index accounts for 16.6% of the entire s&p 500, only about 1 percentage point less than the tech sector. >> it's funny, people always wonder what happens to the money? where does it go? does it just go to money heaven? it's just gone. let's check on the markets this morning. take a look how futures are shaping up after the u.s. averages ended six weeks of gains on friday. it's going to be a lower open, at least that's how it's implied right now. the dow would open down by 72.5 points. take a look at the commodities space as well. first here's a look at oil.
wtis unchanged. brent's down slightly. ten-year treasury, we're watching i believe it's under 2.6%. ten-year treasury note. dollar in focus against a basket of currencies. we'll look dollar/yen, take a look, 96.80, euro/dollar, almost 1.33. gold having a bit of a gain here. take a look at gold, it's up more than 1% this morning, up 14 bucks, 1326. and in goebl news, banks cutting 5500 branches across the european union last year. what this means is that the region has 20,000 fewer outlets than it had the start of the financial crisis. it's now time for the global markets carolin ross is standing by. do you feel like you have a lot less branches when you walk around the streets of the city? >> you know what? it definitely feels like it. but is it a surprise to anyone? no, it's not. a bit of a consolidation move is what everyone was expecting, and
it's good for the industry, too, you would argue. let's look at the european markets because we're seeing a bit of a lackluster session. down by 0.3% after what was initially a positive start to the trading day. keep in mind we are closed trading at around two-month highs, and maybe there's a little profit taking taking place here. i do want to show you the separate indices. xetra dax down. also showing some modest declines. now, the ftse 100 is doing a little better maybe. this, in part, is because prudential, the uk insurance company, has come out with better than expected numbers for the first half of the year, and shares are surging by 2.7%. operating profit jumped 22%, hiked its interim dividend by 16%. and it's pretty upbeat on its outlook statement. not too worried about that slowdown in the emerging markets. and finally, i do want to leave you with a look at the major currency crosses.
euro/dollar, as you pointed out, now below the 1.33 handle. now, there are new reports out in a german magazine that bundesbank is planning a new aid package for greece after the german elections. that did have a bit of an impact on this currency. speaking of greece, second quarter down in annual basis actually fell less than what people had expected. certainly seeing bottom there. dollar/yen rebounding nicely after some initial weakness after we got the japanese second quarter gdp data which was lower than expected. now, changing hands at 96.81 and the aussie/dollar against the greenback, still close to three-year lows. but above that 90, 0.9139. back over to you. >> thank you very much. when we come back, flip this mansion. a new trade in real estate investing. first, congratulations to jason dufner. he won the pga championship yesterday, beating jim furyk,
and this is dufner's first career major title. the victory comes two years after dufner blew a four-shot lead with four shots to play in the pga championship in atlanta. i bet you were watching yesterday. >> i was. yes, i was. it was a good finish. >> all right. right now as we head to a break, let's check on the national forecast with the weather channel's alex wallace. alex, good morning. >> good morning to you. unfortunately, not a great morning for us in the central plains. more rain to deal with in areas that are already waterlogged. you see this cluster of storms making a run for kansas city. could make that commute this morning a little on the rough side. it's all lining up with this boundary which is in place. it doesn't want to move much at all. this will be with us through the early part of the week. moisture flowing northward from the gulf of mexico. so for today, showers and storms. some could be strong to severe. including wichita to just north of oklahoma city. damaging winds, hail. those will be some of the bigger risks, although we can't completely rule out that isolated tornado. meanwhile in the northeast, quiet today, but cold front is
getting closer. and as we head on through this tuesday and wednesday, we could be looking at some strong storms to deal with here. moisture on the increase here for us. we'll see storms increasing today through the interior portions of the northeast. and then by tuesday, everyone along that 95 corridor having to deal with the storms. that includes boston all the way down towards just east of the nation's capital. damaging winds, hail will be the threat with these storms. the good news is behind this front, cooler, more fall-like conditions for a lot of the nation. more "squawk box" coming back at you in just a bit. golden opportunity sales event and choose from one of five lexus hybrids that's right for you, including the lexus es and ct hybrids. ♪ this is the pursuit of perfon. peace of mind is important when you're running a business.
time right now for the executive edge. this is a daily segment focused on giving business leaders a leg up. our first story this morning is high-end flipping. as the housing market improves, investors are finding money in luxury homes. research firm realty track reports that between 2011 and today, flips of homes valued at $1 million or more have risen almost 40%. among the catalysts, wall street investors have bought many foreclosures. also foreign investors are spending billions on the u.s. property market. chinese investors alone spent $12 billion on u.s. real estate last year, but guys, i guess the point is that flipping is backes specially in high end. not necessarily trickling down. >> yeah, and you actually have financing going on for the only purpose of flipping. >> yes. right. >> which makes no sense.
>> putting in hundreds of thousands of dollars to flip. and by the way, to qualify as a flip, you have to sell it within six months of buying it. and apparently that is back. >> but the thing, by the way, you don't see happening, i mean, they talk about the blackstone group and others having $5.5 billion buying up high-end real estate, but i'm not sure they're the flippers. the question is are they the ones picking stuff up sort of on the second flip? is that what's happening here? >> i don't know. >> i would guess that those guys are going for it and not necessarily -- they probably don't qualify as flippers. i bet they're looking for deals, stuff in or close to foreclosure, buying at the low and then holding on to it. >> that's propping up values. >> what's the threshold for a flip? >> it has to happen in six months or less. so it has to get sold again within six months. and i'm not sure that blackstone and some of those guys -- >> colony. >> do you have to close twice within six months or just actually get the deal? >> you have to buy it and then
sell it to somebody else within six months. >> there used to be a show called "flip this house." is that still going? >> i think it is still out there. a little trickier, maybe you have to find some different markets. people are still talking about jeff bezos and his deal to buy "the washington post." a column today says that the amazon founder's expertise in harnessing customer feedback could be a boon to the newspaper industry. publishers now track every click a reader makes online. the column also suggests -- listen to this -- bezos might be able to accelerate the personalization of news which has been a goal of many publishers. an enormous long tail of products is available at amazon from out-of-print books to highly specialized grocery items. there is an analogy to news if mr. bezos can use technology to make it work. news about my town is fine, but news affecting my neighborhood is better and news affecting my
block is best. >> my question, and i keep hearing it over and over again, is somehow there's going to be this synergy between amazon and "the washington post," and that he's going to use people who worked at amazon to create these through technologies. >> i don't think that's going to be the case. it's going to be completely separated. >> it's going to be completely separated, and that's what i don't understand. how is he -- ostensibly, he needs to find great engineering talent, all sorts of great talent, and will he move people from amazon to go work at this newspaper at all? >> i don't think so, but you know what? he knows so many people and understands so many people and is almost like a pied piper when it comes to developing. >> but when people talk about data and being able to use data, amazon has more data than just about anybody else on all sorts of customers. does that ultimately get shared? is it so separate -- >> i bet it doesn't. >> i think it doesn't. but there seems to be some kind of view in the media that
somehow stuff happening in amazon is going to somehow trickle into stuff that's happening with "the washington post." >> is he going to enhance the quality of the digital version of "the washington post"? perhaps. probably. but beyond that, what? >> my gamble is -- and becky, i'm curious what you think -- my gamble is he ends up splitting the paper, meaning right now there's a lot of regional news, local news, plus then there's, of course, the politics. i think he creates something called wash po local that's effectively a community online newspaper and then tries to do sort of politico on steroids that becomes a national paper. at least that's -- >> that's an interesting theory. my guess is he doesn't even know what he's going to do yet, but i do like your idea where you're going with it. and scott may be on to something. this may just be a lot of hope from all of us in the media that he has some magic method, some way of fixing things. we'll see what he does with it. but i like your idea. that's an interesting one, andrew. there's also a growing business in china. online food sales. this is a new marketing tactic.
playing to consumers who are worried about contamination and health scares with very good reason when it comes to china. vendors are betting they can sell peace of mind, promising safe groceries sold online. one consultant says that chinese consumers are willing to pay a higher premium than in the west. i guess the real issue becomes do you believe the online seller, and building credibility is probably paramount to anything you could do here. >> becky, you're a fresh direct consumer. >> i am. >> and you trust them. >> i do. i didn't at first because i didn't like the idea of somebody else picking out my vegetables and realized they were pretty good quality. it does take some building up at times. the articles that take a look at this point out that consumers in china, even when it says organic, they don't believe it because i don't know if they feel like there's anybody who's really monitoring making sure about truth in advertising. >> we're a fresh direct family. >> i do fresh direct in the burbs, too. >> do you? >> yeah. >> if you can't believe the
numbers in china -- >> what can you believe? >> exactly. >> it's a tricky thing. if they had some way of like almost a better business or, you know, consumer issue, some way of developing a brand that you really believed in, that could probably go a long way towards making people feel better and then agreeing to pay higher prices. when we come back, we'll be getting ready for the trading week ahead. plus, we have a look at what's behind a drop in gasoline prices nationwide. first as we head to a break, take a look at last week's "winners & losers." ♪ hey hey ♪ you got me ♪ a picture down in the slump ♪ nothing to do but frown ♪ rainy days and mondays always get me down ♪ [ male announcer ] it's time.
the ones getting involved and staying engaged. they're not afraid to question the path they're on. because the one question they never want to ask is "how did i end up here?" i started schwab for those people. people who want to take ownership of their investments, like they do in every other aspect of their lives. a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪
♪ oh i swear to you ♪ i'll be there for you ♪ this is not a drive-by ♪ just a shy guy ♪ looking for a two-ply good morning and welcome back to "squawk box." i'm going to ask becky quick for a second. >> i know the elmo version of the song. i know the real version, too. >> there are multiple versions. i'm andrew ross sorkin along with becky quick and scott wapner. the average price for a gallon of gasoline slipping almost 8 cents in the last two weeks. the lundberg survey putting the average price for a gallon of gasoline regular at $3.59. among the reasons, increased supply of the motor fuel as u.s.
refineries kept production capacity high. and i should say -- i know everyone gives me a hard time for never driving a car. i drove a car over the weekend. i went to maine. >> you went to maine? >> i was at a camp reunion. i kid you not. i saw guys i hadn't seen in 20 years. shout-out to everybody at camp cedar. i flew home sunday morning. >> so you drive while you were there. rented a car. >> i rented a car. i rented a white ford taurus which actually was not a bad little car. anyway, now to a very unusual piece of audiotape this morning. a media business blog obtained a recording of aol ceo tim armstrong. he's been on the show a number of times. we love tim armstrong, but this is a tough tape to listen to. he is firing or supposedly firing an employee in front of 1,000 coworkers on a conference call. now, here's the background. the day before armstrong told analysts that aol's local news network, patch, would shrink from 900 to 600 websites.
so patch employees took that comment to mean that hundreds of them would soon lose their jobs. this meeting was with patch employees, and it was designed to rally the troops. i'm not sure that happened when he did what almost seems like an imitation of donald trump. take a listen to this. >> if you think what's going on right now is a joke and you want to joke around about it, you should pick your stuff up and leave patch today. and the reason is -- and i'm going to be very specific about this -- is patch -- abel, put that camera down right now. you're fired. >> what just happened? >> it was real. he was legitimately fired. this was the creative director of patch. was fired. apparently he used to take pictures of board meetings and other things as part of his sort of community job. that's something he regularly did. apparently that was not something that tim armstrong was game for at that moment. >> wow!
>> i don't know. i don't know. i mean, i think other people, by the way, were getting fired at the same time, but this was sort of -- >> what do you mean, other people were getting fired at the same time? >> i think clearly if they were going from 900 to 600 websites, maybe he was ultimately planning -- >> some changes. >> -- some changes anyway. but to have that happen in the middle of the call. and then there was a bizarre pause. >> this was something to try and boost morale? >> the whole call was meant to boost morale. the whole call was to say, look, we're going gangbusters here. >> that didn't sound like a boost morale call. forget about the firing. but if you think patch is a joke, pick your stuff up, i'm going to be very blunt? >> there's a number of blunt lines. it's on business insider and i think also on a website called romanesca can you can listen to the whole thing. he says, i don't care about the leaks, which was actually quite interesting. he said, we've invested in this company. we've put a lot of money behind this thing and we're going to keep pressing ahead with this thing. >> maybe it's in serious need of
an overhaul. maybe he's there to change the entire mentality. i'd love to hear from tim, his perspective. >> we will endeavor to get tim to talk about it. it's a new week for the markets and we have a lot of economic numbers on the agenda this week. joining us is chief investment officer at palisade capital management. gentlemen, welcome to both of you. john, this has been a pretty unrespected bull market. this past week the dow dropped by 1.5%, but that comes after six weeks of gains. and i guess people are starting to wonder now, have things topped off? what do you think? >> well, becky, what i'm thinking is essentially the market is wondering to taper or not to taper? when is the question. there's also considerable, i would think, opportunity for profit taking, both up from the june lows of 2012 or the november lows of 2012 as well as just the run on the year-to-date
basis. earnings have come through fairly well, better than expected. so why not take some profits here? nothing to be concerned of, at least that we can see at this juncture. >> dan, you're still pretty constructive when it comes to the markets overall, correct? >> i would say this market is not only respected, it's despised. i mean, people hate the fact that the market is up so much. in a backdrop of a nonfunctioning washington environment and obviously a lot of the quantitative easing which has been very controversial. but i think that, you know, and just a small pullback, the bears come flying out of the woodwork right away, that this is the beginning of something very, very big and very, very bad. i think it's just a pause in the context of a market that's done extremely well. i think you take out your pad and paper, and you start making your list of the stocks you want to buy because you're going to get them modestly cheaper. >> let's talk about a couple of stocks that you like.
one of them is genesee in wyoming. what does that company do? >> i think one of the most misrepresented things is that you can't make money being a long-term investor. we started buying the genesee & wyoming stock which is a short-line railroad operator. they've done a fantastic job executing on both organic growth means and through acquisitions. we bought the stock in the early 2000 period at something close to $3 or $4 a share. >> it's at almost $87 now. >> down from $95. the quarter they reported was excellent. a little bit of currency headwinds because they do operate in places like australia. and they have had some currency issues. to me that's just creating another buying opportunity because i believe this company will make yet another highly accretive, very high-quality acquisition. >> hey, john, there are some things coming up in september, though. when congress comes back, we're not sure what's going to happen in terms of the budget and where things will head from that direction. we don't know what's going to happen with the new fed head, whoever that's going to be, the
nomination process. are you worried about those issues, or is this something you think we ride through eventually? >> well, they're part and parcel of that which we have to ride through. we don't have much of a choice. we'd have to say -- >> but is the market still going to be at these high levels? >> yes, we do believe -- what we do expect, though, at any time, the market could easily be prone to a 4% to a 6% pullback in here. a lot of that, again, in terms of people thinking, becky, that they want to lock in profits. but the overall look ahead tells us that things are getting better. the process of economic recovery here as well as europe coming back online. we've got some better data last week from china. my gosh, we even saw the materials sector post the only positive increase among the ten picks of the s&p 500 last week when the market was slightly off, about a percent. so we'd have to say the market is telling us pause to ponder here. but the direction remains
higher, if modestly so, to the end of the year. >> dan, let's talk about one more stock, bill barrett group. >> and again, this is one of those companies that i think just kind of got lost. they have outstanding oil assets. they have outstanding gas assets, but they have some great assets in oil in the niobrara formations. the shares are in the low 20s right now. they had a confusing quarter right now that kind of overlooked the real assets that are here. and i think domestic energy plays are going to be one of the areas you're going to want to focus on. >> all right. dan, thanks for coming in today. and john, great talking to you, too. >> thanks, becky. coming up, president obama on vacation this week, and congress is also on august recess. but that doesn't mean there aren't some serious washington topics to debate. and we're going to do just that next. [ male announcer ] come to the golden opportunity sales event
to experience the precision handling of the lexus performance vehicles, including the gs and all-new is. ♪ this is the pursuit of perfection. right now, 7 years of music is being streamed. a quarter million tweeters are tweeting. and 900 million dollars are changing hands online. that's why hp built a new kind of server. one that's 80% smaller. uses 89% less energy. and costs 77% less.
my main criteria for the fed reserve chairman is somebody who understands they've got a dual mandate, a critical part of the job is making sure that we keep inflation in check, that our monetary policy is sound, that the dollar is sound. those are all critical components of the job. >> that was president obama answering questions on friday
about who he might be choosing to be the next fed chairman. joining us now to talk about that and a lot more, cnbc contributor ben white. of "morning money" fame and cnbc contributor tony freto. good morning to both of you. i want to talk about yellen and summers because there was a lot of news in terms of stories. there were features that are shaping the narrative around these two people. plus there were comments by the president on friday. let me go to you, ben, first. on friday when the president was speaking, he talked briefly about both mr. summers and what he described as mr. yellen before he corrected himself. and then went on to defend summers, compared summers to rice, to susan rice, suggesting i defend people who have worked with me that i care about. if you're reading the tea leaves, i mean, so many sort of washington watchers were trying to figure out what all this
meant. what did it mean? >> ultimately, i don't think it meant a whole lot, but yeah, susan rice is not the comparison you necessarily want, as she was not nominated for secretary of state after a lot of criticism. he was asked, do you favor larry summers? some of the coverage has suggested that you favor larry summers. his answer to that was it looks that way because he was attacked, and i'll defend anybody in my administration who is attacked. and basically tried to balance it saying summers and yellen are both grade candidates, but he didn't back off summers at all, and i know that summers is still the leading candidate and likely to get it unless something else comes out between now and then. but also he said at one point he does worry a little about inflation spiking. that would tend to favor summers. then he said fed also has to keep employment up, tend to favor yellen. on balance, even. >> just to clarify, those comments were friday. >> friday. >> "the new york times" story was sunday. you're still confident? >> there was nothing in that "new york times" story, it ran through his financial history, but nothing in there was
surprising. >> when did it become a liability? you would think understanding the system better would be an asset. >> right. >> you understand how wall street works would seem to be important if you're going to be sitting in a position like that. >> right. which is not the case with some senate democrats on the far left who say he's in bed with wall street, therefore he can't regulate them, but that's not the case. >> tony, you agree? >> pretty much so. i don't know that i agree completely. ben is much more strong on the summers train than i am. i do still think it's balanced. i think it was admirable of the president to go out and back up a member of his administration. i think there was too much reading into some of the language he used on friday. it sounded to me, having been there myself and hearing another president talk the same way about monetary policy, they don't always use the same language that we're used to using in talking about monetary policy. trying to read into that he wants someone who is, you know, a dove or not is too much. >> what -- i mean, going back to this issue that becky just raised about this "new york times" piece over the weekend that talked about his financial
ties to different firms and, of course, the far left suggesting he's too close to wall street, too close to this idea of deregulation, people have blamed him for the financial crisis. there are republicans who blame him for the financial crisis, too. where do you come out? >> i think that's very real both on the left and the right. i think that exposed it. you wonder every now and then, you know, sometimes, look. these are two great candidates. i think both could be, you know, excellent leaders of the fed. but you wonder sometimes about larry summers' judgment and, you know, if he understands how things look. so what was it lending tree? beyond the board of lending tree, and you ask yourself, is that the kind of place, you know, a board member who wants to be a fed chairman, is that where he wants to be? >> why would you say that, tony? i don't understand. what is the problem with lending tree? i think "the new york times" portrayed it as this subprime lender who makes risky loans when all of its clients are high-end prime consumers. they don't test any less income
than a normal credit card company would. i think the portrayal of them was unfortunate in "the times." >> i think it was very unfortunate. i'd love to help them, but here's the problem with lending tree is that nobody really knows what it is. there isn't a whole lot of knowledge about it out there. and so there is a risk to it. do you really know a lot about lending tree? you know, i don't know a lot about lending tree. do you? i see their commercials on tv. >> we had them on the show on friday. >> you could learn a lot more about them in "morning money" in an interview with the ceo. at the same time, you could make the argument that summers sees this as a wave of the future and took a risk on a company he believes in. i'm not sure that's a detractor. >> what i don't understand is why any sort of experience when it comes to how wall street works, working there, would disqualify somebody. >> it shouldn't. >> frankly, i'd like to see a treasury secretary and a fed president, any fed head who comes in who has some experience, in case things go really wrong. >> sure.
worried than we seem to not be. >> that's a solution. >> i think the conventional wisdom is washington will find the 1,100 deal on funing the government and raising the debt ceiling. you have republicans who would cut deals, they face primary challenges, democrats who will not cut more spending, house republicans at loggerheads on how and where to cut spending. i don't see the path to an easy deal. from the debt ceiling, how do we get there? >> tony, too sanguin? >> yes. they were surprised to hear i was as surprised how this will work out. i really am. i think when the president and congress did the deal on the bush tax cuts, it took away the
deal to get it done. the pressure on the conservatives. that's gone now, it makes all of these fights much more difficult and wall street really understands. >> we will leave it there. thank you, guys. >> thank you. all right, still to come on "squawk box," we have more of today's top stories, including the latest on the board room battle at j.c. penney. that's coming up at the top of the hour. help the gulf recover and learn from what happened .
. >> welcome back. u.s. equities futures at this hour. let's look at how we are setting up on the streets on this monday. it looks like it will be a lower open. at least that's how it's shaping up at this hour. the u.s. stockmarket ending six weeks of gains on friday. that's how we are looking right now. we get ready for the trading week ahead when "squawk" returns.
. >> good morning everybody, welcome back to "squawk box" on cnbc. i'm becky. the futures as you can see are weaker. the dow futures are down 66 points. the s&p is off close to 10 points. this is after the markets are coming off a weaker week from last week. how many times can i say week in one sentence there? the dow was off, that's the first in seven weeks we seen the dow down. japan economy grew at a slower than expected rate. the world's thirds largest economy, grew an an annualized basis. it was below what had been forecast. the nikkei dropping to seven-week lows on this news, down by .7 of a percent in europe, greece second quarter growth numbers came in better-than-expected. the constrax of 4.6% year over year the greek numbers come
ahead of the french, joseph cornelius and euro zone figures expected on wednesday, that will give us a better indication of the state of the economy. they are reporting the central bank leads a new bailout by early next year, checking out shares in europe this morning, similar pressures there, the dax is down by three-quarters of a person. last week it was coming from the footsy and the kak in france. here in the united states, authorities are considering arresting two former j.p. morgan employees for their allegeing rule in the london wale office. ipsos's junior trader the timing of the possible arrest was not clear. but u.s. authorities plan to expedite the former employees to the united states. andrew. >> we got a big week for markets, tomorrow, we will get the government's july retail sales data. will be coming out. on wednesday the producer price index. check this out. on thursday, with eget weekly jobless claims and friday, july
housing starts and productivity will be reported. so there will be a lot to chew on, scott. >> andrew the board's battle at jc penney getting a little more interesting. they met late sunday afternoon to discuss their next move. they say the board is considering ways to remove pershing square investor bill ackm ackman. last week, he publicly criticized them and demanding a replaigs placement of the company's ceo. we have somebody at this table who we should be getting a view on, former banker j.p. morgan, you may have news, but when it comes to governance, i had my rant in the 6:00 hour on this top ec. >> right. >> when it comes to governments, governance, you have a shareholder here, bill ackman, 18% of the company. he's clearly out on the reservation in terms of going
public with lots of this stuff. >> right. >> how can you have a board meeting if you don't trust people inside, therefore, if you don't trust him, what do you do? >> right. >> look. you have a system of corporate governance in this country. there is a difference between bag shareholder and a board member. when you are a board member, you agree to abide by the rules of the board. includes keeping information confidential, having deliberations be confidential. being able have a debate. you vote, you voted, you are with the majority, that's it. the notion of going public with information that's confidential, a notion -- >> they didn't raise any numbers. this wasn't the situation where he's. >> becky the fact of the deliberation, themself, you know, he went into the detail around the board members back and forth. so that back and forth an how people think about it and some of the employees referenced and thaul all that stuff. it's wrong. it's not done and there isn't an
exception for it. so the fact that i think that it's important. i, bill ackman, think it's important. if every director acted that way the whole system would fall apart. my point is, if are you against it, if you are against something going on, take your action as a shareholder. you can have a proxy contest. that itself way the system works. if you are on the board, live by the norms of being a board member. every board member that's linsing to this show knows about it. >> what happens to throw one thing out, what happens if there are things happening in there that had gotten so bad, that, i don't know, hiring and fireing decision were being made without fully informing people i don't know, makes. maybe things got so bad. >> people disagree, they don't air it out in letters him they
don't go on tv. the information is confidential. everybody agrees so that when they become a board member. my point is, otherwise, don't be a board member. >> yeah, i guess, maybe that's the way he could have done it differently, if you are going to go hostile like this, drop your board positions, go out tonight. >> sure. >> here's the question, and i, by the way, i take the position that i'm with howard schultz. i think on this particular issue, it's despicable. i think he has no credibility on ackman, i think they're in this position because of ackman, my question is, if you are the board, what do you do now? what is the next step? >> if you were advising that board what do you tell them? >> i think the board has to take steps to protect the company in the board meeting. they got to take steps to control the information. >> that means control the information, could they run a board and effectively exclude him? that's what the krooet "wall street journal" is talking about this morning. >> he's a board member, he's on the board, so he's going to get, you know, what board members are
entitled to. but there are committees that can be formed, it was in can be controlled, certainly, he's got to get all the information he needs to make a vote. but that doesn't mean that every deliberation has to include him. >> you know, jim, i understand your point entirely. i agree with it. i'm not trying to defend what's happening in this particular case, but it is not a sacred place where people don't have leaks come out of it. it is not. that's the way it works. i think i know about a lot of inside battles. >> i think, certainly, there is that phenomenon. i don't agree with that, either, becky. i would just say, again, the noex of taking the information, putting it in a letter, saying it's a last resort, clearly, he knew that it was going to be very controversial. isn't the way to win your point
in the boardroom t. way to win your point in the board room is to vote. >> my question is alan questrom, he was mentioned as zmb coming back. his concern was not coming back in a hostile situation. this is definitely a hostile situation. you risk losing the talented people out there. who will want to walk into the middle? >> that's a great point what happened on the day? >> stock was up 8%. it gave most of it back. >> the stock went off, you know, following this episode. >> but the idea of questrom being in there, i think a lot of people would love to see. he's a really talented veteran retailer. >> right. >> he, himself, said he doesn't want to get involved in a hostile situation. i think this is beginning to get. >> it became hostile by ackman putting it out there. have you such a broken board and a broken company, that i don't know how, i don't know how this
continues. i don't know what the exit path is. if you are the board trying to control a situation at this point, what you could possibly do to improve the situation. >> well, look, from a recruiting standpoint, it's a difficult situation, for the doubt, for someone to step in. but, look, as a board, you got to handle it. you got to get with ackman, you got to get him to agree not to do this. >> just so we got to run on this, because i want to get to some other issues, there is no legal way to push him off the board if you want. >> it's a moral issue, we are talking about, not a legal issue. >> removal provisions generally require again shareholder action, there are exceptions to that. but there are certainly, you know, he's not free from legal harm or liability in what he's doing and the notion that was in the journal today about it's far from clear that he is, is not right. >> okay. thank you counsellor, you will be take around.
that was eight minutes ability time for your advice this morning. we are talking a lot more. right now, let's talk markets, we are also joined by the index master, the index committee, we're going to talk a little about where the markets are going. david. >> good morning. >> good morning to you. we had ben white on the last hour. he talked about come this september, given all things that might or might not happen in washington the overhang with the fed and yellen and summers duking it out that we could be in for a little bit of trouble from that perspective, which i imagine we could be in for a little bit of trouble for the markets, too, where are you at? >> december's yellen thing i think will gradually settle itself out and so on. but i think the big issue is the accident ceiling, the budget deficit the u.s. congress, it's the whole fiscal policy side that's a huge problem.
and at this point, it looks leak a nasty standoff. nobody wants to give anything. the clock is ticking on the debt ceiling. i don't think we're going to default. i think we will have a crazy 11th hour skirmishes. everybody will decide if the u.s. congress is worse than their own worst nightmares. the markets will get hit as a result and it will be worse than the j.c. penney board situation because there will be 2400 or 535 doing like one guy. >> how long does that go on for? the reason i cc is we had a number of analyst, investors come in and say the next month or two will be choppy, given by default, it will be choppy, some say you ride it through, you don't care, don't try to mark your time, others say, hang tight, watch the show, then see what happens. >> well, i think looking at this whole thing, the debt ceiling issue is the bing one.
we don't really know the exact day. fannie may and freddie mac gave uncle sam a lot of money worth a couple days or something. i think you have to look past it. if we assume as i do at the great standoff the u.s. will not defacility in its debt. we will make the payment, we'll come out the other side reasonably well. it's silly in the middle of it. at that point i don't think it's worth market timing. i think it's something you hang on to, unless you believe there are other factors. the economy is about to go south, which i doubt is the case. or they will damage earnings, i don't think that's the case, neither. they clearly respond due to those. but looking forward, i think we'll make it. but it's going to be a very messy september/october period. >> jim, talk to us about what's going on inside the board room. what are ceos saying, rick large, does japan, by the way, last night the expectation on
gdp was 3.8% him some people say that's slowing. there are issues out there. however, we keep seeing more and more transactions so maybe people are seeing through it. >> i think people are going very, very careful, an druchlt i don't think you seen mna volumes take off and follow the equity markets i think in '14, we will see a substantial rebound. i think the end of the year will be good. hopefully steady progress. but, you know, deals require a higher standard of proof in this market. post-financial crisis in the environment is that we're in, look at dell, look at knitfield foods, look at deals are subject to activists or other challenges challenged. there are any number of reasons. >> what's the biggest hurdle right now that you hear people talking about? when you come to them with a deal, or they're chattering about a deal and say, we're going to hold off.
is there one reason you can point to, they said, we will hold tight, visit this a little later. >> surgeonty is the thing. >> surgeonty on the fed, certainty on what d.c. is going to do? >> you are paying for forward earnings. you are valueing for the future and the certainty that that value will be there and then the other risks. >> we never have certainty. maybe we feel like we haven't. i think they're fooling themselves. >> you can never have complete certainty, you can have degrees of confidence, right. so it's the amount of confidence that i have in the future as well as just issues of sharing risks. and the value of certainty in deals has gone way up post-crisis and it's impacting the amount of deals that get done, period. >> jim, you will be staying with us, david blitzer, thank you for joining us this morning. >> coming up next, time warner, cbs hunkering down for a long battle over transmission fees. in case you missed it, jason
dufner taking home the wanna maker trophy for his first major as a professional. he shot a final round 2 under 68 to bypass jim furyk and finish 120 under par for the tournament. dufner is the fourth player in the last five years to win their first major at the pga. here's your yahoo logo update. it's day six of 30 days of pain either. >> i don't like that one. >> i don't like it. we'll be right back. f music is being streamed. a quarter million tweeters are tweeting. .
. >> welcome back, everybody. millions of time warner customers in the black over the weekend missed the jet's football game and pga championship. while there are some work arounds for this, the fight for retransmission fees at both companies continues. joining us is wine weiser. he is an analyst. this is a crazy situation. are there signs will is an answer in sight? >> give it a few weeks. then you might have more clarity. at the end of the day, cbs will get paid more. consumers will pay more. we'll forget about this in the morning. >> so why is time warner holding out? will they get a better deal? >> their goal is to inflict maximum damage on cbs. both people are trying to hurt each other. time warner will get the blame.
>> you are paying them. >> a lot of money gets reverted back to cbs. half that will go to a buy back. you can understand how they both have an interest in fighting this out. time warner will lose. >> it sounds like a beautiful partnership moving ahead. exactly who you want to be in bed with when it comes to business? >> you think they would be more invested in the long term future health of the distributors. but they know that there are plenty of other channels to distribute confent going forward t. big thing from the broadcaster's side is regulatory reform. this is a multi-year process, you go back to the 1992 cableable, which is the foundation why these rules are in place. it was to help rising cable race. i watched the testimony from the ceo of cbs at the time saying this will never cause cable rates to go up. this can we never a $3 billion business. >> yes.
>> it's fun to watch the testimony from the 1992 from the then ceo. they estimate this year, retransmission fees will generate $3 become in revenue. >> is it from going from a dollar to $2 subskreeber or the windowing period for on-demand content? there seems to be two issues, one is the actual amount of money that will transfer hands from cable operator to cbs. the other is this idea of whether they will be able to give some of their stuff to net flex or hulu or to whomever or amazon, you know, in some kind of period after its distributed over the year. >> it's possible that they're trying to carve into new windowing exclusivities, but the reality is cbs is, along with fox, by the way, shows a very, very aggressive in trying to push the limits of what they can jane rate in revenue. there is interesting contrasts when you look at what they are doing, abc or nbc are doing.
they're not quite so vocal about all of this. >> what is the downside other than the relationship issues, the long-term partnership and so forth, with i is clear, but is this the way it's going to go? why shouldn't they negotiate hard? >> well, as i clipped, do you remember the woody allen crime investigators? woody allen had a great line, if it bends, it's funny, if it breaks, it's not. so i wrote a piece called if it bends, it's money, if you keep pushing it, it's good, don't break it. >> it is brigg congress back in. >> exactly. it's interesting to watch the original 1991 testimony, who is chairing that committee but ed marky. >> oh, wow. >> you look at the faces in this 1991ing is committee. they're all still there. they remember why this is valued in the first place. >> is everybody else mad at cbs right now for potentially being the one to bring down a really
good racket? >> you know what, my read on how, if you look at the words that say, msnbc. you look at the tones from bob eiger. much more diplomat ec. >> the move is we're at war. >> same as kerry over at fox, they're taking an compelsively aggressive tone. >> but i think that everyone, tell me if i'm wrong, i think all the other players love that cbs is the one out front. they're the ones taking the bullets on this ultimately, whatever they get, everybody else will get. >> true. they don't want to break the system. >> right. by definition, they're driving up value. >> right. for now. >> i like this. brian, thank you for coming in. >> thank you. coming up, a couple new products from apple could be on the way, details after the break. still trying to convince miss quick to get on the iphone. >> i have an ipad. i am not a total apple idiot.
. >> pap him is expected to announce its newest iphone september 10th. all things d reporting the company will launch the new version of the mac oss operating system. a little news on apple. we will see what happens with the stock. still to come, an article suggesting oil could slide under $80. we'll get an outlook in today's trading block. >> bless you. then deal makers, private equity and the buzz stories you need to know for this week.
. >> welcome back to "squawk box" here on cnbc. we start with embattled computer maker dell, activist carl icahn spooking some customers. research firm idc saying that dell's pc shipments slid 4.2% in the second quarter, that compares to a year earlier. asc capital reportedly preparing for the exit of outside investors, the "wall street journal" reporting the firm's executives are looking at means of streamlining the company as it shrinks on friday sec and federal prosecutors reached the legal case with the goal of assureing they can continue. we will have kate kelly on in just a bit. the pimco total return fund increased its exposure to related securities in july to 39% to 38% in june.
bill gross fund decreased its holdings in june. the fundz fund's performance turned positive in july. now to our trading block. let's get a check on commodity, hone in on gold and energy price, joining us to talk oil and gas is stephen shork. on gold, we have frank holm, ceo of u.s. global investors. frank, begin with you, we have seen gold move higher up about 1% this morning, what's next, do you think? 1200 or 1400? >> well, it will probably test closer to 1400. we're in the seasonal pattern of gold for the past 35 years. when we have a series of religious holidays and happy seasons from here to chinese new year, historically, gold has its biggest rally. >> yeah, but convince a lot of people that gold is a worthwhile investment, right? there are a lot of people that think the gold trade is done.
>> well, that's speculators try to put too much money into it. we always advocated 12% in gold. for the past ten years with big gold correction, 10% waiting verizon the s&p. you still perform the s&p and having that rebalance each year. gold is an important part of an investment portfolio. >> stephen, wti krutd crude, where is it eheaded from here and why? >> well, we've had a heck of a run up until this point based on some of the strongest demand we have seen in the last 30 years. this, of course, has led to a big decline in supply, which is exacerbated by a lack of access to canadian oil because of some pipeline issues there. of course, wall street never wants to miss an opportunity to exploit an imbalance in supply and demand. this summer, we seen a record rise in speculator's net length in crude oil to the point where
they can refill inventories now eight times over. but at this point, we're at that seasonal peak. demand for crude oil has peaked at the refineries. gasoline demand will begin to eb following a holiday, you take out the decreased demand, in september, we will blame for the gasoline which is cheaper to manufacture. so what this all does add up to, at least from a fundamental standpoint is low prices at this point. crude oil at $105. nets back to about $3.60 for summer grade gasoline, but with the rise in supply that we will see in the weeks ahead, coupled with the fallen demand the template is for lower prices going forward. >> what about the geopolitical issues? what's the premium right now in the price of crude as a result of what we are seeing around the world? >> indeed. well, we've had about a $14 per
barrel rise in oil over the past five weeks. okay, the situation in egypt is simmering still. so that is a potential threat, a choke point of the flow of middle east oil to the west, the suez pipeline or the suez canal. we have that tragedy if quebec of a crude oil train derailing. so there is the concern also there that east coast refineries, their access to this cheap canadian and mid-west oil could be impeded at this point. so those are always facted. those are the unknowns knowns, or i should say the known unknown, therefore, that is. is not driving. that is pure black swann events. >> right. >> it could spur prices higher. looking at the supply/demand fundamental apples coming down the road the road is clear for lower prices. >> all right. guys, thanks, stephen, frank, thanks to you both. >> thank you. i want to talk to you about
dell. we haven't hit on that the way we had the news earlier today, their shipments are down. did michael dell ultimately steal this company? >> absolutely now. >> absolutely not? >> no, this has been one of the most complete processes i've ever seen in terms of the price being tested, the process being tested, every opportunity for others to -- >> i think board has gone out of its what i to try and make sure that they were being separate from michael dell. >> absolutely. this special committee outperformed. >> were they really? >> again, how do you feel about that? >> look what shareholders want directors for the do is to use their rights to get more money. okay. so if you ask a shareholder would i rather have this extra right or would i rather have an incremental value uplift? most sure holders will take the value uplift, andrew t. rule we are talking about is a pretty
technical part of the rule. you are still having the majority of the minority vote. it's what you do with non-votes. what happened was they changed the rule from shareholders who were not voting. those were counted as nos to count as yess. they would not have been able to complete the deal had that change not taken place. they'll be counting those people who are actually voting. >> but andrew's point is the most relevant and valid one i think. they could not have won the vote without changing the rules. >> first of all, that's absolutely not true is there. >> that's how it was shaping up. they kept pushing it off. >> that's what you are saying. i'm i'm telling you, the first vote, first of all the news was out, people didn't have to vote based on a binary choice of this deal versus no deal. again, what a board is supposed
to do is negotiate for value an certainty in that context. they are doing what they think is right. they spin at year on this. >> was carl icahn constructive in this? >> do you think he helped the shareholders get a higher deal? do you give him cred snit do you say he interrupted the process? how from a corporate governance shareholder perspective, was carl icahn a good thing or a bad thing in this? >> i don't think you can say all shareholder activists are bad, certainly, you got to take it case by case. in this case, you know, did he add leverage? i'm not so sure. i think that the shareholder base, itself, was really the one that was impacting it. as opposed to icahn and icahn can add a bit of a circus effect to this kind of proceeding that isn't always productive. so, but this is the new world,
andrew that we're living n. we are going to be in this phase for a while. >> but didn't icahn, tow, if nothing else, he gave the other shareholders the shareholder base an anchor to grab on to, where if carl icahn never came into the mix, this would be done a long time ago. other people won have the same leverage without carl icahn driving the truck, don't you agree with that? >> i think icahn adds an element. you head southeastern as well. nobody was there before icahn rode in. >> i think it's good in terms of short term, what i wonder is what it means long term for the company, if you are looking already at the situation where some customers will standing back, it's been going on so well, it does create a mess. i don't know exactly how to measure all of. that i think some shareholder activism is a good thing. i think it stops things from
getting pushed through, you wonder if it gets disrupted. >> it's a permanent phenomenon. >> real quick, i personally think it should go to dell an whoever buys it, it might not be so easy, but if in five years from now, michael dell puts this up as an ipo and makes a small fortune, how should shareholders do? >> they should feel like michael dell earned whatever profit he got. let me tell you. this is a very challenging company to be in. you can make a decision as to whether you want to ride that risk or not. michael dell is in a position to do it. other shareholders may feel, you know, very differently. if he does turn it around and develops that kind of profit. >> then he deserves it. >> good bless him. >> you believe it's easier to turn this around behind the curtain rather than out on the states publicly? >> look at the report today, you saw the report that said, public distraction creates value destruction because customers and others looking at the
company differently. that's in the news today. so there is no question these distractions are a problem. i mean, i think -- >> by the way, a quick disclosure, you worked on this strax. >> within i was at j.p. morgan, i worked on the deal, absolutely. >> from the special committee perspective. the team was led by jimmy lee and kurt simon. j. pm morgan. >> i want to claire-by-that, i should have said that, that's why i wanted your perspective on all of this. >> when we come book, we will talk more about dem, j.p. penney and the return of the ipos. all the stories that market makers will be buzzing about. we will hear from the editor. he'll be on "squawk box" when we come right back. s
as can you clearly see, the implied opened is lower on the dow by about 60 points. there's the s&p and nasdaq as well. there is something else you want to mention, andrew. >> we are seeing news, blackberry has been halted, just in time to talk to dan primack about the deals, corporate buzz, dan, senior editor at "fortune" magazine. let's go straight on the blackberry issue. last woke there were reports this company could be taken private. do you think we are awaiting an announcement about a potential to go private? >> i would be shocked. the only chepgs exception would be if some private canadian firms did it out of a nationalistic say blackberry fervor, which i'm sure limited partners wouldn't be thrilled about. in general, this is a really tough deal to do at least at this price. you'd be talking, assuming a small premium. really hard to do at that price
given what you have seen with the underlying fundamental also, basically the fundamental also falling through the floor lately. >> dan, is there a strategic fire in the mix that might want to buy this? if you recall, there was a period earlier this year, microsoft looked to buy nokia, would they want to ultimately buy blackberry? >> i think there are strategic buyers that want to buy pieces of blackberry, it's unclear they opened to a sale, which is begging, please, please, buy us. it is unclear whether they are able sell off the patents and device, et cetera. that's unclear. there is clearly a piece microsoft would like. clearly none of the chinese players would like. it is unclear whether blackberry will break up. >> it will be interesting to see what blackberry has today, whether they have a transaction up their sleeves. i believe they have made a similar announcement before, i want to go to a different topic, dan, there is a story in the new york times about the ipo market
and actually a bit of a return to maybe the 90s, which is that wall street analysts are apparently now being sounded out ahead of ipos, perspective ipo players are coming to banks, meeting with the bankers if one meeting. several hours later in some instance on the same day meeting with the analyst ostensibly to talk about how the markets perceive, some analysts saying it's a sales job all over again. what do you think of this? >> i think, obviously, it's troubling. look. one of the reasons for this when you tack about say a big ipo, a hilton down the road or a face b.c. last year, everybody in the market knows those companies, but what we've seen over the last year, one of the reasons we are seeing an ipo boom again is because you are seeing smaller companies able to go public. whole thing we heard mable 12, 18 months ago, you needed 100
million to go public isn't true, you can go public with 50 or 60. the most troubling parts of the "time requests" was there was no monitoring. >> you used to work with j.p. morgan, did you see this shift? >> i wasn't involved in the equity means, the notion that a potential ipo firm would want to meet with an analyst and talk with them and see them, you know, why would that not happen? why would they not be able to want to see the analysts and be able to talk to them? clearly, they can't talk about pricing in their rules, i don't believe the notion that there aren't compliance people involved. can i tell you, certainly, at j.p. morgan, the compliance people are involved in everything. and certainly in this area, they're going to be involved. so the notion that they're not involved, i don't accept and the notion that these guys want to look at and sort of see these
analysts, you know, again, it feels a little. >> you are saying they should be able to see the analysts? >> they should. there are areas they can't go into. they should be able to meet the analysts and that's clearly permitted and it was permitted when they were put in. so everything that's happening is being done based on what was put in at the time. >> but we tried to put up walls, would we be better off saying is j.p. morgan is pitching for the ipo. if they're not pitching for the business, you want their perspective, you want to go across the street, you can get different perspectives from analysts to understand the way the market thinks, maybe not the analysts at the particular firm bidding on the project at that time. that make sense? >> i hear, i understand the point certainly, we could go there, but i think that these are heavily controlled meetings. the notion that, again, there is price talk in that type of
context and so on, i don't think that's happening. i think these a meet and groats type of meetings, but on the other hand, i don't think they're all that important. so at the end of the die, if your point is, why go there? you know, people can decide that. that's not the way the law works. >> hey, dan, i want to change topics on you. >> yeah. >> you say amazon and bezos earlier, from what i understand, reading material you put together. you said if you were an amateur shareholder, you would not be happy about him buying the washington post. why? >> yeah, with enthis deal first broke, a lot of the talk was, isn't this great? bezos, look at the possible synergies, look at what he did for the post. the post would have new distribution channels, all. that bezos. not amazon, if amazon was buying the post, i can understand those arguments. it's bezos individually. if bezos will be a passive
owner, nothing for amazon, not all that much for the washington post except it continues to stay in business. if bezos will be active. all of those minutes, it's a lot of hours to publish a newspaper and be in charge the of it, that's time he's not on am skon differences. >> x, y, z, whoever buys a sports team or does whatever, it's a different thing. they're going to spend some time. they will active. is that going to take away from the day-to-day job that they're doing at their primary place of employment? >> i mean, it depends on the individual, obviously the example given a lot is stooemp steve jobs and pixar. i think it could, look at all te atension, we in the media, we are paying attention, this is a media property. it's a small mna transaction. there were much larger deals last week and the week before. there will be incredible
scrutiny under jeff bezos. i think that, by very chew of that. that will make him spend more time than it would another ceo, than potentially buys a sports team. when a rich guy buys a sports team, there isn't much expectation they will be involved, they don't know anything about running a sports team. >> i don't know. more owners these days are. >> they get criticism for that. they get a lot of criticism for. hey, dan, weigh in real quick. are you firing or hiring bill ackman to be on the board of jcp? >> oh, goodness. i'm fine. he's saying, let me have my way or i'll walk away? i think if i was on the jcp board, i might be thanking him for that offer. >> we will leave it there. thank you for joining us, dan. we appreciate it very much. >> all right. when we come back, we are on whale watch this morning. arrests may come in the wale case. in the next hour, defense
wale fiasco, a badly timed kraid trade that cost the bank more than $6 billion. the two individuals are reportedly likely to be arrested and do itted for among other things mismarking the value of certain credit positions in 2011 in order to mask a growing set of losses to the bank. j.p. morroccan declined to comment. the u.s. attorneys office is spearheading this investigation. you may know them from the recent sac cases, also declined to comment. quite a few cases still exist including working with london attorneys, to arrest them, they are thought to be living in the u.k. extradition from europe has been a problem in recent case, including key people in the libor scandal. it will be essential in making in case. also uncertain is the status of two other central players in the london wale debacle.
ipso had the name the london whale during the 2010, iksil is thought to be koornth. macris had supposedly retreated to his home country of greece, from what i am told but isn't reported to be facing charges. why that is, guys and how involved he was, whether he had enough direct knowledge to make a case against him isn't yet clear. that's kind of the talk among the people in the know, perhaps they didn't have the evidence in that. >> in the 26:00 hour, there is another story in the new york times today about the idea that the february fib and the justice department may bring information against the firm. they were trying to square this idea that they were going after certain individuals on a criminal basis, suggesting clearly they thought they misled somebody and then they're going up to the firm him i'm trying to square how can you go up to the firm, if the firm, itself, was
ultimately being misled. >> there are a certain issues here j.p.'s strategy, the cio office in general was mismanaged, it was supposedly hedging about these positions with no direct correlation to underlying positions, these guys went off and tried to cover their tracks. that's their strategy. that's why you see these individuals in focus here. as for the firm, there was another piece on the permanent probe a month long look that the u.s. senate panel did last year into what went wrong. and they believed, or at least they suggest in their report that senior officials at j.p. morgan also downplayed the size of losses and perhaps weren't as honest at least in real time with the investor basis to what was going on. so there were a number of incidences, they had the cfo saying we think the loss was x. j.p. morgan said, look, he was trying to give people a picture
quarter by quarter. he didn't knowingly mislead. that's where you you see the senior echthe firm gets involved. >> thank you. >> thank you. >> when we come back, defending your portfolio, investors "squawk"ing names ike like general dynamics him we will take aim in the next hour. check out the futures, the dow futures are down by 62 points, s&p down close to 29 points. "squawk box" will be right back. golden opportunity sales event to experience the precision handling of the lexus performance vehicles, .
. >> get ready for the trading week. what to expect from retail and housing data. >> the harsh cuts brought on by the sequester haven't stunted the industry so far. why your portfolio might be a defensive stock. the cable wars continue. time warner cable and cbs facing off over retransmission fees. >> never go in against acy sillian when it's on the line. >> the latest on the negotiations as the third hour of "squawk box" starts right no
now. >> welcome black to "squawk box." our guest hosts, and we will have more from jim still ahead. fifrs your morning headlines. just breaking, a blackberry has been halted. they have now announced they are seeking strategic alternatives, they are opened to a joint chen venture of the company or possibly a sale or other options. this comes as the company has taken quite a beating. you can see the stock there $9.87. i will say first heinz said previously on multiple occasions, i was saying it comes as no surprise the company has,
least. put something out there publicly or led you to believe that they were opened to doing almost anything at this point. it comes a week after they considered taking themselves private. that's the closest proximity in terms to news of this. >> it's fine. i agree, i think what this says is they are running a process. this is a formal process that's going to be run as opposed to we are opened to a sale, come give us a call. i think they're going to be running a formal process. >> let me tell you. ross, get to the table in case you want to jump in. >> can i tell you quebecly, it says there can be no assurances this exploration process will result in any transaction. the company does not intend to disclose further development unless and until the board of directors approves a specific transaction. >> you may by a gen, you may not approve the distinction or think it's that material.
it's different when a company says we might be opened to an approach, to we will run a formal process. we will see fires. we will lean them up and make them compete against each other. that's a different thing. >> one other thing they say they will be doing while this special committee is focusing on alternatives, they will continue with driving efficiency and the role of the blackberry market. >> what bakky read is interesting, it doesn't sound like it's a fire sale. >> no. >> it sounds like they have a reservation. >> you are the former lawyer. >> lawyer/banker, it says that, it is true. >> we will see where it goes, for those keeping score at home, your former employer j.p. morgan is handling the sale. you can call up 212-270 number. i don't know who is handleing the sale at j.p., the law firm will be handling the special committee. >> i wonder what happens now, right? whether it's the whole thing,
whether it's parts as we talked earlier, whether people want to boy the whole thing? who knows? who knows who would be out there that would want this company at this point? >> what they could do with it. >> i can see microsoft jump in, if they want hardware. >> the intellectual property. >> there is a consumer base that's fixed. people like becky that won't switch. >> i there. i want an actual keyboard. >> i think a lot of people will look. the question is who will post? and i think that the real question on the buy side is going to be, should i do this now or can i wait and get it? is it going to be a better situation later? is it really going to trade? >> i have to admit, i am a shrinking base the i.t. people here push me to get the iphone or another device. >> they still have some business, supply in europe, isiah, among the lower tier. >> thank you. me and the developing nations. >> but there is still a lot of
business in the developing nation, becky. >> thank you, andrew. >> okay. we also have some other news this morning, u.s. authorities considering arresting two former j.p. morgan employees, i'm sorry, for their alleged role in masking the whale targets, london whooel whale trader iksil. the time of the arrest was not clear. u.s. authorities plan to extradite the former ploy yeets to the united states. the bird battle at j.c. penney getting interesting, the "wall street journal" reporting the board met on sun afternoon to discuss their next move. part of the report saying the board is supporting currency. last week, ackman sent two letters, publicly criticizing them an seeking the ousting of the chairman and demanding a replacement of the company's
ceo. we have batted this around the table a number of times already, scott. all right, andrew, right now, u.s. equity futures shaping up for a lower open here in the united states. we have been down maybe an implied open about 70, 50. now we're looking at about 66. bottom line, lower open here in the united states, at least how that looks right now. overseas in asia, the world's third largest economy grew at an annualized pace at 2.6% a. third straight quarter of expansion, but it was below forecast. the nikkei dropping to a low. take a look at what's happening across the pond over in europe this morning, european markets are largely negative, though modestly so. >> all right. the markets will be dealing with fresh batch of economic reports. we will get retail sales an housing. joining us on set is dan greenhouse with etig the chief local strategist there and bob
bruska. before we get into what we're expecting this week. give me your general idea object where you think the economy stands right now. is it as strong as we have been thinking before we got that jobs number, that big government jobs report, bob? >> i don't think so. the isms, the physicals that were on the stronger side. if you look at those reports, they each had something kind of screwy in them t. manufacturing is a strong production index which was out of sorts with everything else in that report. it's a discrepancy between orders and production in a very long time. i think it's the top 4% in terms of the divergences. ism services is what odd. you see the slowdown in problems. when you look at jobs, a lot of the jobs are part-time jobs. the hours worked statistic is a cleaner number to look at. they're slowing, they're slowing from where they were. so you see that there is a slowdown there. we are looking at retail sales
being a kind of a week number. auto sales the last eight months have been on a plateau, they're increasing, the rate slowed. i think the fed threw its eggs in this basket, we're going to take that tapering a little too soon. just as the economy started to lose some of its bloom. economists say we think the economy is strong enough. i don't know the economy right now looks like it has lost some momentum an that mmpfh. i think we have to watch for. dan, you agree with that? >> bob is right about everything except -- >> everything, thank you. >> yet i don't agree, except for his characterization the economy is losing steam. we barely lose, if we are in a steam, we are in a recession. i think it's a terrible economic environment. >> if the fed is saying we are looking at tapering, we think the economy has improved, are they lie something. >> no, i don't think they're
lying. i think there is an important discussion point entirely lost in this whole conversation. >> which is? >> which is they don't care. what i mean is they are nervous about buying all these treasuries. >> they come out of high water, they will taper? . >> here's the thing, so if a few of us are arguing athat i are in the process of switching the easing tools and in teary, we all know in theory always works, in practice, if you stop buying bonds but promise to keep rates low until 2030, have you an offsetting positive effect. >> you guys are saying the same thing. you are saying it like this and this, he's saying it like this and this. >> he's saying it's a slow economy the economy has slowed down. >> you guys both think the economy is relatively weak? >> the whole world thinks it's too weak. >> if the economy was steady state, the fed is saying, we have to get off tapering, it's not about the state of the economy. it's about the fact of the
policy? >> i think under the surface they are concerned. they want to switch away from asset purchases and towards rates are going nowhere, right now the market thinks about december 2013, the fall, i'm telling you. >> the reason i bring this up and make a big deal about it, the market and the bulls in the market said all along, it's going to be okay if they taper and pull back some of the stimulus if the economy is actually improving. what both of are you saying there isn't science the economy is improving. the other half, it's fine if they are pulling back at a time when the economy is stepping up to fill the void. we want to hear you are not convinced. >> i will let him go. the other aspect i think is that the fed has this big thing about trantd parency what is trantd parent about saying one thing and doing something else? this analysis, which i a agree with, the idea is that the fed has this program that says that they're going to support, you know, the inflation rate. they want growth to be stronger. when push comes to shove, it
seems like they will taper regardless. it's as though they are now giving us these statements after the fomc meetings that are crafted to rubber stamp the policy. they've already decide, rather than to give us a statement that's a template for what they're going to do. these are very different things. >> you know what the problem is? there is excessive transparency with the fed. >> there are too many people speaking outside of meetings and whatever else, if markets are having a hard time reading what the fed is going to do. >> let me push back on that also. i don't think there is too much transparency, when charles foster or vick fisher's headlines hit the tape, we talk about them. we don't use them as a guide. >> people last week, they put it out there, not a voting member. >> 20 minutes ago, nobody knew who she was. i'm not saying she is not important. >> when she comes out and makes the comments she did last week. >> next week, her chair is a voting share.
>> the quick point is there are not too much transparency, these guys are make ec it up as they go along, it is absolutely unequivocally the wrong way. >> there are people who would arc you this whole process has worked thus far. >> well, it depends on how you define "works". >> we have these moments not so great, absolutely, not so bad. >> i worry what's coming, though. >> you have this giant balance sheet. they've absorbed these securities. they are concerned about absorbing more. they don't want to say that, it's like coming home, you have done something bad. they think they cannot talk about it, maybe nobody will know. ultimately, i think that they need to articulate the policy to us that they intend to follow. and this last -- >> one voice, not 40. >> even so, even so, look at the minute. the last statement, this switch
on inflation that got bullered no longer to dissent. it was very strange, previously, they thought it was going to be at or below 2%. now it will be up at 2%, you can't change your outlook on the economy like that and make everything fine. >> i have a question for jim. i will bring it back to j.c. penney if you can believe this. >> that's a tie. we were bound to go there, anyway. >> the board members of the federal reserve shooting their mouth off left and right on their views of what should happen, right? nobody seems to have a problem with that, maybe they do. yet, int j.c. penney situation, you have bill ackman shooting his mouth off, they are considering how to fire him. >> i would say, look, board deliberations need to be confidential. i agree with the notion that the fed to some extent need to have more of a unified voice. you can't have these deliberations always in public. there's got to be a give and take and there's got to be an ability for that to happen. you know, privately. but i don't think we know the
consequences yet of this trade. in other words, i think to date it really has worked t. question is, what's coming next? and i don't think we can evaluate that for some time. >> dans you disagree with my point the idea that rising stocks have been ridesing through all of this we feel like the economy is going to be step income to fill the void the fed leaves. i'm questioning that, whether you, do you think that is going to be the pitch? >> what i agree is this idea for years economists have been saying growth was just around the corner. i have been joking, yeah, that corner is 185th street. growth is not just around the corner. there is nothing to suggest the next eight quarters should look different than the previous quarters. the question is whether the policies in place are appropriate. >> what i'm wondering is the stockmarket's reaction to this. if tapering comes in, yes, they've all told us this is not tightening, this is tapering. but if the economy is not there to do, to fill the void of the
feds stepping out. >> two quick points, one, i'll drop dead before i agree tapering is tightening. second of all, with respect to the fed pulling back in the market, you are working under the assumption somehow the fed pulling back is a negative. i'm arguing. >> the mark is going to initially read it as a negative regardless hoff you you. >> the short term. >> spin it. it just is. >> it's a higher level. >> you agree? >> right. >> i think market will read it as a concern, it has read it as a concern. i think. >> the way we brush it off is say, don't worry the economy will support it. >> i don't think tapering equals the economic improvement. i don't think those two things are necessary. >> i don't either. >> let me make one quick point before we leave here, we have seen this movie before, where the fed has shifted from an easing, saets let's say this is tightening, 2003, 2004, stockmarket, when interest rates shifted, stockmarkets fell 6%.
the second time the stockmarket fell 10%. >> you can't argue to me, it's not going to matter when they step back from tapering if you are arguing they have been doing the right thing to this point and qe 3 has -- >> in september, what if the fed release a statement that says we will buy $70 billion of bonds instead of $80 billion bonds and we will keep the interest rates low until the market hits 2%. >> the market may freak out a minute. i'm not saying a long-term freakout. there may be a freakout, regardless, for little bit. >> the other problem is the other thing about the fed i don't like they give us the numbers 6.5%. they say it doesn't mean anything. then we talk about it. why not give us 2%? >> they have been yelling in my ear for three minutes. i love the conversation. thank you for coming in. >> you guys are great. coming up, stocks on a roll in spite of the sequester cuts that were supposed to be painful. still ahead, designs for the
hyper loop. today the transportation system rumored to be twice as fast as a plane, cheaper than a bullet train and completely self powered. phil lebeau will give us a preview. as mentioned earlier, blackberry saying it will explore strategic alternatives. we will talk to an analyst next. ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪
. >> welcome back to "squawk box," blackberry halted, joining us on the "squawk" news line, daniel ernst. he covers the company. good morning. >> good morning. >> they will look at joint ventures, they will look at selling the company. ilts now in play for the first time, i don't know if it was the first time or it was always in play. is this a surprised or not? >> well, in awhat it is, actually more than a year ago, they had hired bankers to look at a strategying review but never followed through with anything in any significant manner in all the conversations, we and the analysts of the company made it pretty clear, they want to go alone. in fact, it was that almost head
in the sand mentality that drove us to a cell rating recently in that i think they really do need a strategic partner and they weren't actually looking at any. so this does change things a bit. but the difference is a year ago, we all still thought the best asset at plaque berry was their service revenue of about $4 billion a year, roughly 60% even margin and that was more than 100% of the company's profits. then in the december earnings call, they revealed that new contracts for blackberry 120 would actually start to wind down these very, very lucrative contracts. now, looking at it from a strategic buyer, i'm thinking, what am i getting? an operating system that has less than interesting penetration. >> walk us through two pieces of this. >> yeah. >> who could buy the company, how much would it go for? the market $5.12 billion.
stock trading at $9.76, maybe it will trade over $10 today, we will see. >> right. that's the issue. is a year ago when we thought they had the service revenues, we thought they were the largest people that could buy. he heard ibm was looking at taking over the service component. there was probably a possibly of the security part of the business going into a google or microsoft to shore up their mobile efforts. now what we have seen with the pentagon approving things like apple and android, but maybe if security element of blackberry isn't all that unique the service revenue is going away. so i think they're going to have a very, very difficult time finding a strategic buyer and the other issue is that now when service revenues go away, they have to rely on actually making money on hardware, which they've always done okay on, but never had to rely on 100%. the smartphone market is increasingly getting more and more competitive.
it's hard to make profits under low volume. >> so, dan, the ash terrors -- owe arbitrors are setting up a premium, what challenges are you saying that you articulated? >> well, so, what the transaction might get done at and what is the company really worth? we think at best the company is worth $8 a share. i think the typical takedown will be something like a 20% premium. so you are looking at a little more pane. investors might be looking for a larger premium. but their issue is that makes it tricky t. enterprise value is only $2 billion. they have liability. so you only need to finance $2 billion to buy this company or take it private, which is not that much. if you do take it private, tow, if i'm lending money to the company, i'm saying, how are you
going to pay for this interest rate going forward? you no longer have that recurring service revenue. >> which have a former mna banker and lawyer extraordinaire. >> dan the value will be driven by the competition for the aasset i think in this case. can you just gives a more clear view in terms hoff how many people you think will compete and go all the way to the end on this asset? because that will drive the pricing? >> well, that's just it. knowing what we know now, which is public information the service revenues are killing off. they have been sort of unproven new model where they're going to try to sell the service to the corporations directly, of course, 70% of the sub scribers are consumers, you pay nothing for e-mail on android and iphone, et cetera. so i think it gets very, very difficult. they do have a global noishl of servetaries are installed, co-located in telecomes around the world. those are very difficult to get.
that's probably a billion or $2 billion capital investment. so, again, there is a $25 billion market cap here. i think it gets tough. strategic buyers have been looking at it. the obvious, guys, right, they want to get into combloebl commerce the chinese makers can't do it. they will never get into the u.s. economy that way. they won't get approved. the pc makers, hps and democrats have tried and failed getting into mobile. i don't think they will do it. so it leaves a lot of software companies, the best thing going for them is actually the ticket price is not that high. >> what you say you get a smaller premium to jim's question and his point, you have fewer people in the process, so you are only expecting a 20% premium rather than something richer, correct? >> i think that's fair, yeah. >> i want to go back to one idea, you mentioned the chinese, you believed they would not be allowed to buy this asset? >> absolutely not.
we are told that one of the key assets of blackberry is they have this tremendous in with the u.s. government, in with a lot of governments around the world and the u.s. regulators have been very strict, they called the soft bank sprint agreement, merger agreement approval by the u.s. government as we said that they have as to make sure there wasn't chinese products in the network. >> dan, what happens when the stock starts trading again? >> well, it's definitely going up. i think there is quite a number of people who looked at the results, saw the market and said this thing is terminal. the management crew has their head in the sand. they're trying to run a business that is going to fail. there is a lot of shorts in this stock. it's going to be pretty aggressive this morning. >> i was going to say the market
will trade it up. they will read this as there is somebody there. this company has been on the market a while. so why make this announcement? something is there is what the market will say. >> dan, thank you for your assessment. glak berry, by the way, expected to resume trading at 8:30 a.m. we might have a little tick up. coming up, though, strength in defense stocks, despite the harsh cuts brought on by the sequester, we will talk to a defense analyst next. still ahead, i lie musk set to unveil his adventure what to expect from the hyper loop. h ax, the only underarm low t treatment. h ax, axiron can restore t levels to normal .
. >> welcome back. blackberry announced strategic options, trading expected to resume little literally in one moment. up $10.70. we will see if it goes higher or lower, after starting the day or closing the day on friday at $9.76 a share, we had a little game around the table. it looks like our guest host this morning. >> not surprisingly. >> extraordinaire, got it right. >> go figure. >> who actually does this for a living? >> fortunately, with edidn't bet any money. >> all right, there were many concerns about how the sequester would impact the defense industry, but the sector has continued to decline, joining us
is carter copeland defense analyst at barclays. these stocks have ripped in the face of most people thinking maybe they wouldn't have given the skefter and some other things. >> i think if you started the year, every single large cap defense stock was going to be a market outperformer, then handily so, i think we'd be surprised knowing the sequester went through. there has been a real focus on cash. people have flocked to this group as a high cash yielding group and the companies have surprised in their ability to cut costs ahead of the budget declines as produced outside margins. so numbers have been okay t.dod has found a way to maneuver around a bit and live within its reduced means. the companies are deploying capital shareholders, people like. does it last? >> i don't see anything that makes a change in the short term, i think is the best statement to make. the dividend yoelds are still high. you look at these companies from a cash perspective, higher
discount rates means less pension contributions. so cash flows stay high. in large part the large cap spaces is devoted to giving a lot of that money back to shareholders, either in the form of outsized dividends or outside sharing purchases, the mark will keep paying for. you like them, your favorite name in the group is gd, general dynamic, right? >> i think what we like is the exposure the large cap and business jet market and the gulf stream asset. they got a new aircraft ramping up, the g 650, it will be a phenomenal airplane. so that combined with the modest discount, balance sheet optionality, margin expansion story, that's unique, all those are good reasons. >> are you bullish boeing still? we were talking in the break how the hold up in the stock, it's been resilient in the face of a lot of negative news over the past six months.
>> i think what's happened in commercial area ro space landing, yes, boeing has a good defense company, really the story has been one of relative growth. as other industrial stocks slowed in their growth outlook, boeing has a backlog, it's depending on the model we lock at four, five, six, seven years, they got increasing margins as they deliver the 787. they throw off a lot of cash, which is going, once again, baaing to shareholders and people like. once again, there is visibility to that earnings stream and greater certainty to it in your view? >> exactly. is a true, sort of unique differentiator, for boeing, they can look out six, eight, ten quarters and see, i'm going to deliver these airplanes at high profits. kind of growth people will pay for. >> carter, thanks. talk to you soon. when we come back, plenty of data this week. retail sales an inflation numbers an hougdz starts. we have professor liesman who will be joining us next with
>> sac capital reportedly preparing for the exit of outside investors. the journal reports the firm's executives are looking at means of streamlining the company as it shrinks. on friday, they reached a deal to keep the firm operating during the legal case with the goal of assureing wall street the firm can continue. reuters are reporting the commodities market regulator wants all of the firm's documents and communications related to the london metal exchange of january, 2010, it's the latest sign of inquiries into inflated metal prices. they have formed a political action committee and pinted the first registered lobbyist. the taken is putting a priority on interaction with congress on
issues of free speech on the internet, government under surveillance and copywrite and pat tent law reform. becky. >> thank you, judge wapner. >> welcome. it's a big week for economic numbersch steve liesman joins us on set. steve, there is a lot of debate about how closely the fed will be looking at these numbers. >> you can settle that debate. we talked a while ago of the important of the july data in august. this is one of the biggest weeks. there will be other employment data, gdp employment revisions. first of all, i will talk about this in a second. the deficit will be out at 2:00. that plays a factor in the taper as well. retail sales coming up. 25% feeds into gdp. i am seeing reports, guys, of gdp around 3%, especially given what happened last week, wrooil while on vacation, the government took the time to ve advise up the trade data, ppi, cpi, claims looks like it's
under control, august is a decent month for getting a good read after the education auto shut downs, wash out of the data, housing starts to see what kind of impact higher interest rates have had on the housing market. >> all right. we had a huge debate. you weren't here to weigh in. they disagreed on a lot of areas. one place they seem to agree is on the idea the fed has decided it's time to taper. come high water, they will change what they see. they don't matter that much. >> i think high water would be an overstatement. >> i added that. >> i think the fed is on track. it would like to taper, if the economy justifies it, i think they'll do it. >> it asken have to be strong numbers. >> that's right. supports the burden of proof. the burden of proof right now is on the economy to prove why a taper should not hawaii you had relatively strong employment growth. gdp number looks stronger, not
in the 1s, that's significant. >> what's the minimum economic levels we have to be at for them to taper. what is the break point? >> we asked that question. we said, what is the maximum employment rate at which the federal rate would taper, a, it's where we are. i don't think the fed will taper into a 1% gdp economy. by the way, excluding what is happening with the federal government. if you might, i did some work, the deficit out at 2:00 today, this has been. >> which has been going down. >> it's the difference between coming down, exactly, scott. when you look at the economy, you want to look at separate what's going on in the government sector the private sector. this has been the largest three-quarter cumulative decline in government continue biegs to gdp since 1980. since 2003 the q 2. >> on a percent. >> in other words, on a percent of gdp basis, not a on a dollar.
>> so the government has taken away two percentage points in gdp over the last three quarters combined. any other three-quarter period, that itself the largest since i went back to 1980. >> what happened in 1980? >> the wind down the report back right there. if you go back to the 70s, 'wind down from the vietnam war, you would get something similar from those lines. bottom line, i think the feds will look to that. the more the deficit improves, the less the treasury has to borrow t. less they have to borrow the greater the percentage of the fed's purchases of the total issuance in its quantitative easing. so that's another reason why the fed may want to taper. it comes in, all of a sudden, it's not the 600 pound gorilla in the treasury mark the 8, the 900. >> do you think they'll take that deficit improvement and taper as much as they can? >> in other words, they won't leave that as a further cushion? >> that will be another rationization for tapering. along with an economy that
should be in the 23 percent annual. i saw vince ryan hart today, there is the improvement. it has been getting better. enmoos less treasury issuance. >> is there a level of tapering that the market from any survey or anything you've looked at that the market can accept? if it's 85 to 65, is that okay? if it's a 50? is there a level that the market will not have a tantrum over? >> well the cnbc fed survey sed says the market expects a 20 market taper in okay. it could be an october taper. >> if the market is smaller, though, are they going to be just as billing of a player? . >> yes, absolutely. would be the point. so you taper just to stay in place, if that treasury issuance goes down, we will need to hear from jack lui hopefully soon. that's an important thinl, bernanke said it was not a
factor. i don't think he's right about that. i think -- >> you stay the same to tread water. >> with the declineing treasury issuance. >> it has to be a factor. >> it's got to be, your total effect is how much you take off the market. >> i'm in. thank you, steve. >> steve, thanks. coming up, the showdown continues, time warner cable continuing to black out channels in several major markets. we get an update on the negotiations next. [ male announcer ] come to the golden opportunity sales event and experience the connectivity of the available lexus enform, including the es and rx. ♪ this is the pursuit of perfection. ♪ help the gulf when we made recover and learn the gulf, bp from what happened so we could be a better, safer energy company. i can tell you - safety is at the heart of everything we do. we've added cutting-edge technology, like a new deepwater well cap
and a state-of-the-art monitoring center, where experts watch over all drilling activity twenty-four-seven. and we're sharing what we've learned, so we can all produce energy more safely. our commitment has never been stronger. lecoca-cola is partneringg. with nashville parent and charlotte parent magazines, along with the mayors of those cities, in the fit family challenge. a community wide program that offers free classes that inspire families to get out, enjoy moving together,
and even track their activity online. it's part of our goal to inspire more than three million people to rediscover the joy of being active this summer. see the difference all of us can make... together. golden opportunity sales event and choose from one of five lexus hybrids that's right for you, including the lexus es and ct hybrids. ♪ this is the pursuit of perfection.
. >> welcome back. no resolution between time warner and cbs. joining us, business editor, dan, have you an interesting perspective. a lot of people look at this as cbs' problem. you say it's cable, time warner cable that has the problem? >> i think distribution we all thought was king is in trouble. they've lost 750,000 video subscribers in the last five quarters. that's 6%. this is a company with $26 billion in debt, exam expenditures running 3.5 billion a year. a big interest bill. you can't afford to lose revenues the way they are. >> you can't afford to lose customers the way i imagine they could if this goes on too long. if this goes on past when the jets start playing, for example, i imagine it will, customers will start calling up saying i'm
cutting the cord, i'm calling verizon for their service or something like that. >> they won't. it's not going on past the nfl start. >> it may be resolved, they are losing their customer base, they are losing 130,000 subscribers in the quarter. it's one of the reasons, i think it's the middle of august, so all the influential people at time warner cable are at their apartments in new york are at their summer home. they're not miss anything, be you there is a revolution in the way people access content. they can be watching it in one of five or six different ways. that's why i think you are not hearing more of a scream. >> how does this end? >> i think they'll negotiate and outcome. now it feels like an intense arm wrestle. >> one thing to throw in the mix. time warner cable may be in play. if you are going into
potentially a sale process at some point, how important is getting the right number on this and is there a short-term deal you might make if you know that it's going to be out of your hands in six months to 12 monthss? >> well, it would be very important to get the number right if are you selling because it has an impact to all of the other numbers. somebody did a sensitivity analysis, now this is going right here, what does it mean for the other contracts? that would affect the forward projection and the sale. >> some people say it's the dollars, some say it's the windows for on-demand content. cbs is saying i want to lever annual amazon and netflix and everybody else, cable saying, we're competing against those guys, too, we need showtime on-demand right now. you can't give it to everybody else. >> this is a part of, cbs has to figure out in the long term, if they're in a place where people are cutting cords an access, they have to play in all those different areas. what they're seeing i think from the ratings and the viewership
habits dvrs, hulu, et cetera, that cable box is not the path to viewership that used to be. >> i am assuming. one last thing the cable side of this some people say it's a high margin business not to have the content, meaning time warner cable will always win, they'll have the pipe, people will pay for the pipe t. margin gets taken out by all the other stuff. >> well, the pipe is only as valuable as the stuff you send through it. they have a voice business. they have a data business. people pay a lot less for data than video t. video stuff is what people are willing to pay for. >> thank you. when we come back, if you need to get to san francisco from l.a. in just 30 minutes, you can hitch a ride. tesla ceo is preparing to unhave a till hyper loop. this is an ultrafast system. phil lebeau will join us right after this.
it's a bird, it's a plane. no, it's elon musk's latest venture. supersonic tube transportation. phil lebeau joins us with more. a story we've been waiting all the past three hours to hear about, phil. >> andrew, this is called the hyperloop. i'm not sure a theory -- and that's all it is a theory at this point -- has received as much hype as the hyperloop. elon musk says it's a cross between the concorde and a rail gun and an air hockey table. that's the most we know so far. here's what else we know about what he will unveil this afternoon. the hyperloop will make travel between l.a. and san francisco, cut it down to 30 minutes. it would be solar-powered and the tickets to go on the hyperloop would be comparable or less than going on a plane or a train. elon musk says he's not going to
develop the hyperloop. he's just putting this theory out there as a mode of superfast transportation that should be considered for development in the future. he says it will have an open architecture. we did find a company out in longmont, colorado, called et-3. that stands for evacuative tube transport. it's working on tube transport technology. it says that tube transportation is closer than many people believe. >> the tube is the guideway. and it is a tube that goes from -- you know, just like along a freeway network, for instance, two tubes that would be right down the median, for instance, that these car-sized vehicles that are magnetically levitated operate inside these tubes that have all the air removed. since there's no air, there's no friction. once the vehicles get up to speed and merge into the flow of traffic like a car merging on to a freeway, they are coasting the whole trip using no additional energy until they get to their destination. >> by the way, top speed would be perhaps up to 4,000 miles per
hour. take a look at shares of tesla. one reason the hyperloop's getting so much attention is because of the success we've seen with tesla with elon musk. shares up 390% in the last year. this will get a lot of attention when elon musk unveils it at 5:00 eastern time this afternoon. again, it's just a theory. it's not a company that he's starting. his way of saying, hey, have we thought about developing this for superfast travel in the future? >> phil, stay right there. we want to bring in jim cramer because i'm dying to hear what he thinks of this. almost like a pneumatic tube? >> i've learned not doubt this guy. phil just gave you the performance figures of tesla. let's not forget solar city. this guy, literally, delivers. he's very bezos-like in the sense that he's got a very big picture. who am i to doubt him? he's just been too right about too many things.
i want to take a hard look. >> it's really cool to think about it. i want a tube built from here to anywhere i want to go. but i have some long thoughts on this. jim, so good to have you back from vacation. what's catching your attention as you're getting geared up and looking back at what you missed last week? >> desperate hail mary pass by blackberry. >> yeah. >> some of the parts seem to go down every month as we see some losses. that's obviously weighs on this whole market. but i look again, i thought last week was one of those weeks where the industrials looked so good. a sense that china may not be that bad. definitely a sense that europe's better, continuing to get upgrades in the financials in europe. i don't know, i think things are pretty good and this downturn this morning may be the opportunity to get in for those who haven't had the chance. >> jim, we will see you in just a few minutes. phil, we'll see you throughout the day, too. when we come back, we've got -- >> we've got more. [ marco ] i'm a student at devry university.
and this is my home team. this is my large lecture hall. this is my professor. and also my coach. this is my booster club. this is the guy who's graduating ready for a great career in technology. [ male announcer ] in 2012, 90% of devry university grads actively seeking employment had careers in their field in 6 months. join the 90%. learn how at devry.edu. right now, 7 years of music is being streamed.
a quarter million tweeters are tweeting. and 900 million dollars are changing hands online. that's why hp built a new kind of server. one that's 80% smaller. uses 89% less energy. and costs 77% less. it's called hp moonshot. and it's giving the internet the room it needs to grow. this&is gonna be big. hp moonshot. it's time to build a better enterprise. together. ♪
make it happen with the all-new fidelity active trader pro. it's one more innovative reason serious investors are choosing fidelity. get 200 free trades when you start using active trader pro today. stock of the day. you're seeing it there. black berry. the company announced it is setting up a company to explore
strategic alternatives. joint venture, partnerships is or a full sale of the company. that stock up almost 10%. before we go, we should thank our guest host. and we have no time. thank you. it was wonderful to see you. come on back. >> i'll be back. thanks for having me. >> scott, thank you. >> that does it for us. make sure to join us tomorrow. right now time for "squawk on the street." ♪ the boys are back in town ♪ i said the boys are back in town ♪ ♪ the boys are back in town >> all right. that's for us, i guess. good morning, welcome to "squawk on the street." i'm david faber with jim cramer. we're live. the week begins with concerns with slowing economic growth. japan, the country's second quarter gdp came in below expectations. that news has put pressure on futures. as you can see there. and pressure on european market, i believe.